IIFCL 8.91% Tax-Free Bonds Tranche II – December 2013

by Shiv Kukreja on December 7, 2013

in Uncategorized

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

India Infrastructure Finance Company Limited (IIFCL) is back again to offer its tax-free bonds and as expected this time, it is carrying higher rate of interest for all the maturity periods. The issue is getting opened for subscription from Monday, 9th of December and is scheduled to get closed along with the HUDCO 9.01% issue on January 10th, 2014, which is a Friday.

Size of the Issue – IIFCL raised Rs. 1,213.01 crore from its Tranche I issue in October and plans to mop up another Rs. 3,000 crore from this issue, including the green shoe option of Rs. 2,000 crore.

If the company is able to successfully raise its target amount of Rs. 3,000 crore from this issue, then it plans to launch its Tranche III issue sometime in January again.

Categories of Investors & Allocation Ratio – Investors have been categorised in the four usual categories and the percentage allocation has been the same as it was in IIFCL’s first issue:

Category I – Qualified Institutional Bidders (QIBs) – 15% of the issue is reserved i.e. Rs. 450 crore

Category II – Non-Institutional Investors – 20% of the issue is reserved i.e. Rs. 600 crore

Category III – High Net Worth Individuals including HUFs – 25% of the issue is reserved i.e. Rs. 750 crore

Category IV – Resident Indian Individuals including HUFs – 40% of the issue is reserved i.e. Rs. 1,200 crore

NRIs Ineligible to Invest – Once again, IIFCL has not allowed Non-Resident Indians (NRIs) and Qualified Foreign Investors (QFIs) to participate in this issue.

Coupon Rates on Offer – Coupon rates in this issue are absolutely same as those got offered in the NTPC issue – 8.91% per annum for the 20 year option, 8.73% per annum for the 15 year option and 8.66% per annum for the 10 year option.

These rates are applicable for the retail investors investing Rs. 10 lakh or below. All other investors will see a cut of 25 basis points or 0.25% per annum for the respective maturity periods.

Rating of the Issue – Like its previous issue, IIFCL Tranche II issue is also ‘AAA’ rated. CARE, ICRA, Brickwork Ratings and India Ratings, all these four rating agencies have assigned their highest credit rating to this issue.

These bonds are again ‘Secured’ in nature as certain receivables of the company will be charged equivalent to the outstanding amount of the bonds.

Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first come first serve (FCFS) basis in each of the investor categories, based on the date of upload of each application into the electronic system of the stock exchange.

Listing – IIFCL will get these bonds listed only on the Bombay Stock Exchange (BSE). As required by the listing rules of the SEBI, the company has committed to get the bonds allotted and listed within 12 working days from the closing date of the issue.

No Lock-In Period – As these bonds are freely tradable, an investor may sell them on the BSE whenever he/she wants after these bonds get listed on the exchange. That is how these bonds do not carry any lock-in period.

Demat/Physical Option – Though these bonds are tradable if taken in the demat form, investors have the choice to subscribe for these bonds in physical form as well, if they don’t have a demat account or they don’t want to take these bonds in the demat form.

Interest on Application Money & Refund – IIFCL will pay interest to the successful allottees on their application money, from the date of realization of application money up to one day prior to the deemed date of allotment, at the applicable coupon rates. Unsuccessful allottees will get interest @ 5% per annum on their refund money.

Minimum Investment – Investors are required to invest a minimum of Rs. 5,000 in this issue i.e. at least 5 bonds of Rs. 1,000 face value each.

Interest Payment Date – IIFCL has not fixed the date of interest payment for this issue as yet. It has decided to pay its first due interest exactly one year after the deemed date of allotment.

NTPC issue, which got closed on Thursday, received an overwhelming response from all the categories of investors. As IIFCL is offering coupon rates absolutely same as those offered by NTPC, it is very much clear that these tax-free interest rates are very attractive.

Though I don’t expect this issue to get subscribed as fast as the NTPC issue, the investors, who missed out on the NTPC issue and/or want to invest only in ‘AAA’ rated securities, I think this issue offers a very good opportunity.

Also, a number of macro economic data is expected to get released sometime next week here, such as trade deficit for the month of November, IIP growth figures, CPI inflation, WPI inflation etc. This data will be very crucial for the RBI Governor Dr. Raghuram Rajan to take his final decision for the RBI’s monetary policy of December 18th.

One more rate hike would once again ruin the mood of the market participants in the bond markets and result in a jump in the G-Sec yields. Investors should keep a close eye on all these events also.

Application Form of IIFCL Tax Free Bonds

IIFCL Tax-Free Bonds – Bidding Centres

IIFCL Tax-Free Bonds – Banking Matrix

Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in IIFCL tax-free bonds, you can contact me at +919811797407

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